All posts in category Argentina

Argentina: Burying the hatchet?

By Arturo C. Porzecanski*

Photo credits: Finizio and Global Panorama / Foter / Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Photo credits: Finizio and Global Panorama / Foter / Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

The administration of Cristina Fernández de Kirchner has shown a willingness to bury the proverbial hatchet and bring to a definitive end what was once the largest sovereign default in recorded history – nearly $100 billion in obligations to domestic and foreign bondholders and official foreign-aid and export-credit agencies, including the United States Export-Import Bank.  In late May, Argentina reached an agreement with its official creditors (gathered as the so-called Paris Club), committing to repay everything that had come due in full and in cash – nearly $10 billion in principal, past-due interest, and interest-on-interest – over the next five years, starting with a down-payment in July.  In recent days, President Kirchner has also signaled that she is ready to negotiate a payment plan with bondholders who are potentially owed even more than the Paris Club creditors.  The trigger for this conciliatory attitude is two U.S. Supreme Court decisions announced on June 16 which granted jilted creditors wide latitude in seeking redress from Argentina.  The first ordered the government in Buenos Aires to stop discriminating among its bondholders by paying most but not all of them; and the second mandated banks operating in the United States to disclose any and all assets owned by Argentina anywhere in the world, facilitating efforts to seize them by unpaid creditors.

Argentine governments since the closing and troubled days of 2001 have taken a notoriously hard line toward creditors ever since Acting President Adolfo Rodríguez Saá announced that he would be suspending payments on the public debt and dedicating all sums budgeted for that purpose to fund an emergency jobs program and increased social spending.  Cristina and her predecessor (and late husband), Néstor Kirchner, embraced a populist-cum-nationalist view of the world according to which the state must favor the interests of the majority of its population, particularly in terms of redistributing income from the “haves” to the “have nots.”  Pervasive state interventionism, confiscatory taxation, disrespect for private property rights, widespread controls (on prices, interest rates, foreign trade, and capital flows), and confrontational attitudes toward investors became the hallmark of economic policy in Argentina.  Despite a vigorous economic recovery starting in mid-2002, creditors never got a single payment from Argentina – and the government made only an arrogant take-it-or-leave-it proposition to private creditors by which they would turn in their bonds and receive new ones worth one third as much.  By late 2010, over 92 percent of the private creditors capitulated and went into the debt exchange.  According to a reputable comparative study of sovereign defaults in the Journal of International Money and Finance published in 2012, Argentina’s behavior towards its creditors displayed an exceptional degree of coerciveness.  While Argentine and European creditors had no luck pursuing their claims in their respective courts, most bondholders who had legal rights under New York State law succeeded in obtaining favorable judgments – and lately, in gaining enforcement rights as well.

Argentina has set such a bad example in terms of how to restructure the public debt that no other nation has dared to follow it since.  Given the recent advance in creditor rights courtesy of the U.S. Supreme Court, chances are that no other government will ever be motivated to copy Argentina’s rogue-debtor behavior – a very good outcome for the world at large.  Concerns that the decade-long judicial fight in the United States will slow down or impede future sovereign debt restructurings are greatly exaggerated.  Before reaching their decisions, the U.S. courts heard from many academic and non-academic experts, and from several governments (Brazil, France, Mexico and the United States), and the New York District Court of Appeals dismissed warnings of impending doom as “speculative, hyperbolic, and almost entirely of [Argentina’s] own making.”  Argentina engaged in uniquely egregious misconduct, violating the well-established norms of sovereign debt restructuring, refusing to negotiate with its creditors, ignoring court orders, and failing to honor its obligations subject to U.S. law despite the country’s unquestioned ability to pay.  The legal rights conferred to minority bondholders in the 1990s, which were actionable in this instance, have been superseded during the 2000s by the widespread inclusion of new “collective action” clauses, inspired by English law, preventing a small minority from blocking a debt restructuring supported by a large majority (at least 75 percent) of creditors.  These clauses have worked very well in recent years, including in the cases of Greece and Belize in 2012 and 2013, respectively.  Therefore, while the advancement of creditor rights brought about by the Argentina litigation will encourage governments to be more conciliatory towards their creditors, the evolution of market practices means that fewer than 8 percent of total creditors will never again be able to demand payment in full the next time that a government obtains the consent of everyone else.

*Dr. Porzecanski is Distinguished Economist in Residence at American University.

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by clalsstaff on June 25, 2014  •  Permalink
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Posted by clalsstaff on June 25, 2014

https://aulablog.net/2014/06/25/argentina-burying-the-hatchet/

Performing the Pope

By Brenda Werth

Photo credit: presidencia.gov.ar | Creative Commons

Photo credit: presidencia.gov.ar | Creative Commons

The pope is a populist par excellence – Pope Francis has proven to be no exception – and Argentine President Cristina Fernández de Kirchner (CFK) is trying to harness some of his unprecedented approval for her own ends.  Since his election in March 2013, supporters of Pope Francis have credited him with changing the tone of the Catholic Church, renewing its relevance, detracting attention away from intractable issues (abortion, gay marriage), decrying capitalism and refocusing efforts on fighting inequality and poverty.  “Who am I to judge?” he famously responded when asked to comment on gay priests.  And yet, in his previous life as Archbishop Jorge Bergoglio of Buenos Aires, his judgments with regard to gay rights, specifically his strong condemnation of gay marriage, are what then caused the substantial rift between him and CFK’s government.  The Argentine government has passed some of the most progressive gay rights legislation in the world, making same-sex marriage legal and awarding full adoption rights to same-sex couples in July 2010.  CFK called Bergoglio’s stark opposition medieval.  What is surprising, then, is the conciliation that has taken place between the President and Bergoglio as pope.  It has taken place over the last year in the form of public rituals and urban iconography, bringing the Pope and CFK together in a symbiotic performance of national identity and Peronist imagery.

Given their past differences, their newly fashioned bond conjures a kinship not based solely on shared political views.  CFK has drawn public attention to certain rituals and events that link the two through the construction of familial intimacy.  Perhaps the most stunning example of her attempts to incorporate the Pope into the big happy Kirchner family is in her party’s use of a photographic collage juxtaposing Juan Perón, Néstor Kirchner, CFK, and Pope with the caption, “Mirá pibe a dónde llegamos” (Look, kid, how far we’ve come).  In May 2013 the collage appeared on a gigantic banner covering the façade of the Central Market in plain view of motorists on the heavily transited Riccheri highway.  In June, she broke protocol when she discarded the recommended template and wrote an informal letter to the Pope in honor of the Day of the Pontiff.  Discussed at length in the press, the missive was personal and colloquial in tone and closed mysteriously with Fernández urging the Pope to “take care” and “drink mate.”  When the President’s first grandchild was born a month later, images of the President accepting the Pope’s gift of baby shoes circulated widely in the press, together with her exclamations of “Look what the Pope got me for Néstor Iván.”  And in August, the Perón-Kirchner-Pope collage appeared blazoned on the side of a van deemed the Argentine version of the “Pope mobile,” unveiled by the Kirchner party in support of Frente por la Victoria candidates.

The collage captures perfectly CFK’s campaign to include the Pope in the big happy Kirchner family, but more importantly, it positions CFK herself as a key member of this influential family as she seeks to consolidate not only her own legacy, but also her political future.  With Juan Perón positioned top left and Néstor Kirchner top right, the collage resembles a family tree, in which CFK and the Pope are both direct descendents of a conflated Peronist/Kirchner genealogy.  Recast as founding fathers in this familial image, Juan Perón and Néstor Kirchner look down at CFK and the Pope from an atemporal, mythological realm, their solemn gaze directed at the newfound alliance between CFK and the Pope, solidified through the handshake between two of the world’s savviest of populists.  Dictatorial and democratic regimes alike have manipulated family discourse in Argentina to achieve political means.  The almost imperceptible image of the National Congress Building that constitutes the background of this collage is a reminder of what this performative family portrait ultimately seeks to achieve.  The Pope’s enthusiasm to play the familial role is unclear; a sign of wariness might be detected in his decision to postpone his first official trip to Argentina until 2016.  This date, ostensibly chosen in order for the Pope to participate in the bicentennial of the Declaration of Independence, perhaps more conveniently allows him to avoid the intense campaign period preceding general elections in 2015. 

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by clalsstaff on March 10, 2014  •  Permalink
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Posted by clalsstaff on March 10, 2014

https://aulablog.net/2014/03/10/performing-the-pope/

Argentina: Yet another political cycle ends in crisis?

By Inés M. Pousadela

President Cristina Fernández de Kirchner / Photo credit: Expectativa Online / Foter / CC BY

President Cristina Fernández de Kirchner / Photo credit: Expectativa Online / Foter / CC BY

Another ismo born of peronismo – kirchnerismo, more recently reshaped as cristinismo – is coming to an end in Argentina.  President Cristina Kirchner and her government – reelected in 2011 with 54 percent of the vote – have lost support and burned political capital at an alarming pace. For most of the decade that she and her predecessor and late husband, Néstor Kirchner, have occupied the Casa Rosada, economic growth and favorable external conditions fueled both public expenditures and private consumption. The Kirchners’ administrations (Nestor’s in 2003-2007 and Cristina’s since 2007) renewed state intervention in the economy after the failure of the “neoliberal” experiment led by Carlos Menem (menemismo, another variant of peronismo), and implemented social policies that elicited widespread support from a population that was sympathetic to redistributive initiatives after the economic crisis in the early 2000s. Yet little progress was made in reducing inequality or increasing social cohesion, as was evident when inhabitants of poor suburban areas looted their own neighbors’ small businesses last Christmas. As the economy has weakened, corruption and the absence of efficient and transparent institutions have once again riled the middle class, as shown by both opinion polls and street protests.

The quick social fixes and improvised economics that have long characterized Argentine politics invariably have an expiration date – which in this case seems to be arriving soon.  High inflation – 5 percent in January alone despite repeated attempts at price controls – is eroding wages as the government keeps trying to fund expenditures by printing currency. Amidst inadequate investment and widespread corruption, commuter train crashes have killed dozens of people; massive electricity cuts have taken place over the summer, and gas supplies are expected to fall short as soon as the weather chills. Government denials of any intention to devalue the currency rang increasingly hollow as the official value of the peso dropped 19 percent in January – the biggest devaluation in 12 years. Leaders’ portrayal of the tendency of the population to hoard dollars as an ideological deviation, rather than a rational economic decision, rankled.

As the quality of life of Argentines declines, popular discontent mounts. The prevailing sentiment is one of uncertainty not just about the value of the currency, or even about the durability of policies that are typically announced one day and contradicted, modified or ignored the next. The deeper trepidation in popular feeling is that the future itself has yet again become uncertain.  No one doubts that a cycle is ending; the question – candidly posed even by some of the government’s allies – is how this will all end.  Will conditions become as bad as those that cut short the governments of Raúl Alfonsín in 1989 and Fernando De la Rúa in 2001?  And what comes next?  Unlike those two relatively recent debacles, this time it is the Peronistas who risk association with economic collapse.  With the president increasingly relying on her loyal inner circle, anxious peronista governors, mayors and labor leaders are trying to distance themselves from the Kirchnerista experiment.  Peronista candidates jockeying for position in the 2015 presidential race are as apprehensive as the broader population, while opposition forces lack incentives to cooperate towards developing a credible alternative. Across the spectrum, political leaders appear as clueless as the government regarding how to get out of this most recent mess. Judging from Argentina’s experience, mounting popular frustration is likely to find some expression in the streets as well as at the polls. It is still to be seen which combination of electoral politics and street protest eventually prevails.

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by clalsstaff on February 11, 2014  •  Permalink
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Posted by clalsstaff on February 11, 2014

https://aulablog.net/2014/02/11/1005/

Argentina’s Mid-term Elections: The Beginning of the End for Cristina?

By Santiago Anria and Federico Fuchs *

Cristina Fernández mural Photo credit: CateIncBA / Foter / CC BY-NC-ND

Cristina Fernández mural Photo credit: CateIncBA / Foter / CC BY-NC-ND

Rising inflation, loss of confidence by the private sector, and lack of access to international credit markets make victory in Argentina’s mid-term elections on October 27 especially important for President Cristina Fernández – or else she will face the prospect of two years as a lame duck.  Her governing Front for Victory (FPV) faction of the Justicialist Party (PJ) seeks to protect its legislative majority.  (Half the seats of the lower chamber and a third of those in the upper chamber are at stake.)  Based on the results of the Open, Simultaneous and Obligatory Primaries (PASO) held on August 11, the FPV appears likely to lose some seats but still maintain a slight majority, considering that a number of the seats in dispute in the lower chamber correspond to districts in which it fared poorly in the 2009 elections.  Before her unexpected surgery last week, Fernández had been central to the electoral campaign, hand-picking and endorsing Lomas de Zamora Mayor Martín Insaurralde as the first deputy on the FPV’s list.  According to some surveys, previous adjustments to her communications strategy increased her approval ratings, and with her recovery from surgery expected to take a month, there is speculation that the FPV may win some additional “sympathy” votes.

The PASO primaries showed that the FPV lost in key electoral districts, including the city of Buenos Aires, and the provinces of Buenos Aires, Córdoba and Mendoza, but that it continues to be the only political force with national reach.  The opposition remains fragmented, but Sergio Massa, a former government ally and current mayor of Tigre (elected on the FPV ticket), has emerged as the key opponent in Buenos Aires province and as a likely presidential candidate for the 2015 elections.  He may challenge Daniel Scioli, who is the current governor of Buenos Aires and is, at least until now, backed by Fernández as her potential successor despite resistance from some factions within the FPV).  Massa’s Frente Renovador still has limited territorial reach, but he enjoys the support of the mainstream media, a branch of the General Confederation of Labor (CGT), the Church and, perhaps most importantly, a prominent group of mayors in Buenos Aires province.  He is trying to capture a more centrist vote, promising the “end of confrontational politics” and focusing on what he claims are the “real issues” affecting Argentines – corruption, citizen security and crime prevention, and inflation.

The results of the upcoming elections will define the options for the Fernández administration.  If the FPV fails to keep a solid majority in Congress, the issue of constitutional reform that would allow for reelection will be off the table, and Fernández will not be able to run for a third term.  In policy terms, negative results will increase pressure for economic adjustment and pro-business policies. Fernández and her predecessor, deceased husband Néstor Kirchner, have both proven their capacity to revamp their administrations after electoral defeat by defying such pressures and raising the stakes. But with defeat in the polls, and with a diminished force in Congress, it will be harder for her to maintain party discipline as the prospects for 2015 grow bleaker.  A lot also depends on how the opposition fares: a clear winner among them (most likely Massa) will become a clear challenger for 2015 and probably put even greater limits on any government strategy, whereas a still atomized opposition may give Fernández more leeway. The task ahead for the FPV will be to define and support a presidential candidate that can continue the Kirchnerista project. Performing well in the congressional elections will give Fernández more room to define this, or to at least block non-desired candidates.  We may be witnessing the beginning of the end for Cristina, but it is not clear whether any of the opposition candidates can force her to steer the Kirchnerista project in a new direction.  Not even the most plausible contender in the opposition (Massa) or the most likely successor in the FPV (Scioli) seems to have any meaningful change to offer. If both of them represent anything, it is Peronism’s ability to adapt in adverse times to stay in power. But that is nothing new in the history of Peronism.

* Santiago Anria and Federico Fuchs are graduate students in the Department of Political Science at the University of North Carolina at Chapel Hill.

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by clalsstaff on October 15, 2013  •  Permalink
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Posted by clalsstaff on October 15, 2013

https://aulablog.net/2013/10/15/argentinas-mid-term-elections-the-beginning-of-the-end-for-cristina/

Malvinas-Falklands: Just More Demagoguery

Photo credit: blmurch / Foter.com / CC BY

Photo credit: blmurch / Foter.com / CC BY

The UK’s recent referendum in the Malvinas-Falklands suggests that neither side in the dispute is serious about finding a lasting solution.  Few observers were surprised that the overwhelming majority of the islands’ residents – all but three of the 1,517 persons casting ballots – would vote to “retain their current political status as an Overseas Territory of the United Kingdom.”  Since the war in 1982, London’s decision to station 8,000 troops (more than four times the local population) and decentralization of control over fisheries have enabled islanders to enjoy one of the hemisphere’s highest standards of living.  The UK government has encouraged a blossoming of British identity on the islands.

British and Argentine political leaders couldn’t resist the opportunity to demagogue the results of the referendum.  Prime Minister David Cameron said the islanders are “British through and through and that is how they want to stay,” and he warned that Argentina should take “careful note” because “we will always be there to defend them.”  In a series of 27 tweets in two hours, President Cristina Fernández de Kirchner ridiculed the referendum.  “An English territory more than 12,000 kilometers away?” she asked.  “The question is not even worthy of a kindergarten of three-year-olds.”  She called the residents of the islands a “transplanted population.”  Foreign Minister Hector Timmerman threatened legal action against firms helping explore for oil around the islands, and both houses of the Argentine Congress voted unanimously to condemn the referendum.  Washington has stayed on the sidelines despite its strategic alliance with London and tensions with Buenos Aires.

Both countries have changed greatly since 1982, and the chance that the rhetoric will escalate into greater tensions seems remote.  But nationalism, symbolism and opportunism continue to dominate the Malvinas-Falklands issue 30 years after a war and in the second decade of a new century.  With their economies in bad shape, the current governments in both London and Buenos Aires may welcome the international distraction.  The prospect of rich offshore oil deposits around the islands has raised the stakes, with both countries accusing the other of wanting the islands merely for their natural resources.  Argentina, moreover, seems intent on pushing its neighbors into supporting its stance on the islands, exposing them to the contradiction between the two important principles at play – a historical claim of sovereignty versus a current referendum of clear popular will rejecting it.  Of the two corners that the UK and Argentina have painted themselves into, Argentina’s is more complex and will require a more patient, long-term approach involving, perhaps, United Nations mediation.  Kirchner has expressed hope that the new Pope could act as a mediator in the Falklands-Malvinas dispute, yet his Argentine nationality and past comments that the islands belong to Argentina make that implausible.  It is clear that putting the issue on the front burner and trying to drag the rest of the continent into the debate has not served Buenos Aires’ interests well.  The UK’s referendum is unhelpful, but President Kirchner still has room to tone down the rhetoric and threats, and avoid letting a tactical setback lead to a strategic blunder.  Chances of that happening are better under her successor, and the next election isn’t until 2015.

 

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by clalsstaff on April 1, 2013  •  Permalink
Posted in Argentina, Europe

Posted by clalsstaff on April 1, 2013

https://aulablog.net/2013/04/01/malvinas-falklands-just-more-demagoguery/

Argentina Foreign Policy – National Pride or Domestic Consumption?

Photo by Jonathan Huston

The stridency of Argentina’s foreign policy over the past two years suggests an effort by President Cristina Fernández de Kirchner to capitalize on elements of authentic nationalism and harness them into a durable political tool at home.  Buenos Aires has dialed up the pressure on the Falklands-Malvinas dispute with the United Kingdom by seeking regional support and calling for a boycott.  The nationalization of the holdings of Spain-based oil giant Repsol has also soured relations with several European states.  Recently, the Argentine government has assailed the impounding of an historical frigate, the Libertad, in Ghana by agents of an investment fund that owns defaulted Argentine sovereign debt, labeling them “vultures.”  Argentina has ramped up criticism of U.S. restrictions on its agricultural exports, as the two countries trade accusations in the World Trade Organization.

The conventional wisdom in Washington has been that President Fernández de Kirchner is picking fights abroad to distract attention from economic and political problems at home.  Following its record $100 billion default in 2001, Argentina remains locked out of most international financial markets despite deals to discount and reschedule much of that debt.  Inflation is high and capital flight is so serious that the government has imposed strict controls on sending dollars out of the country – a measure unpopular with the middle and upper classes.  These problems have taken a toll on the president’s popularity, as have intimations that she might change the Constitution to permit her to run for a third term.

The view from Washington misses a couple key points.  Many of these nationalist moves have been wildly popular – above all the Repsol decision.  To attribute them to President Fernández de Kirchner alone ignores deep feelings in Argentina that the country deserves greater respect than it gets, as well as the fact that since the peso crisis, rejection of the sort of “carnal relations” that President Carlos Menem had with Washington (in his own words) in the 1990s has grown strong.  The current foreign policy orientation harkens to a much longer tradition, from Peronism and beyond.  There is little chance that issues such as the Malvinas or the Libertad are going to make Argentines forget about everyday economic challenges.  Rather, they are a manifestation of an Argentine narrative in which the country is denied its rightful place in international politics and trade – and in which it is being held unfairly in the penalty box for the peso crisis.  The United States support for the billionaire investors and hedge fund managers who bought deeply discounted bonds but are demanding full payment, and Washington’s subsequent vote against loans Buenos Aires needs from international financial institutions, are playing into nationalist themes.  Fernández de Kirchner’s foreign policy rhetoric taps into resentment; she is hardly responsible for creating it.

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by clalsstaff on November 12, 2012  •  Permalink
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Posted by clalsstaff on November 12, 2012

https://aulablog.net/2012/11/12/argentina-foreign-policy-national-pride-or-domestic-consumption/

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